Payday lender ACE Cash Express will pay $10 million in refunds and fines for illegal collection practices that federal investigators said pushed borrowers into a debt cycle.

The Texas-based company agreed to the payments in a settlement announced Thursday after investigators found that ACE used harassment, false threats of lawsuits or criminal prosecution to pressure overdue payday loan borrowers into taking on additional debt they couldn’t afford.

Payday loans are a form of short-term borrowing that typically involves small amounts offered at high interest. They have repeatedly been criticized by consumer protection officials. ACE offers payday loans and other consumer loan products via the Internet and at stores in 36 states and Washington, D.C.

“This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back,” said Richard Cordray, director of the federal Consumer Financial Protection Bureau, the agency that conducted the investigation.

According to a consent order signed with the agency, ACE “engaged in unfair, deceptive and abusive practices” that violated the consumer financial protection laws. Tactics used by the firm’s debt collectors included:

Using legal jargon to imply overdue borrowers could be subject to “immediate proceedings base on the law” even though the company did not actually file lawsuits against the customers or seek criminal charges for non-payment of debts.

Threatening to charge extra fees and report borrowers to credit-reporting agencies. Corporate policy did not authorize such charges and reporting.

Harassing borrowers by making excessive phone calls seeking payment, calling customers at work or calling borrowers’ employers and relatives and divulging details of the debts.

Investigators found that ACE’s training manuals instructed collectors to “create a sense of urgency” that at times included veiled threats of harm.

One ACE collections agent said the company was “not at liberty to discuss” what would happen if a borrower’s debt was transferred to a third-party collections firm. But the agent assured the debtor that collectors at the outside company would definitely “hassle you.”

The company agreed to provide $5 million in refunds to overdue borrowers harmed by the tactics, pay $5 million in fines to the consumer agency and cease all illegal, unfair or deceptive debt practices.

ACE said the investigation findings relate to some of its collection practices before March 2012. Since then, the company said it has cooperated with the consumer agency, implemented compliance changes and hired full-time legal analysts to monitor collection calls.

The company said a review of a statistically valid sample of its collection calls found that more than 96% complied with industry standards. A company analysis also found that 99.5% of customers who had loans overdue for more than 90 days did not take out new loans with ACE within two days of paying off the old debt.

“We settled this matter in order to focus on serving our customers and providing the products and services they count on,” said ACE CEO Jay Shipowitz.